Mergers and Acquisitions (M&A)

There are all sorts of reasons two businesses may want to become one, but in the context of business funding, the case almost always is one where one company has far less available capital than another and needs the money from the other. In that case, the company in need of cash seeks to merge or be acquired by another company in order to get a capital infusion of some sort. It is not unlike a partnership between entrepreneurs where one has the cash and the other offers sweat equity, only in this case it is the combining of two businesses instead of two people.

There are various ways a company can merge with another, including:

  • One company acquires all of the assets and liabilities of another company. This is the most common method. In this case, the company being acquired gets cash but thereafter typically ceases to exist.
  • One company buys all of another company's assets.
  • One company buys all of another company's stock.

Whatever the case, the main reason is usually economic; the two businesses think that the combined company will be more valuable together than if they remained separate. This may occur, for example, where one company has access to a different customer base, or there may be economies of scale that can occur by joining forces, or there are products and services one company offers that the other does not.

Whatever the case, if you are seeking funding for your business and are considering the M&A route, there are two important factors ...

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